Saudi Arabia uses blockchain to inject funds into local banks

Saudi Arabia’s central bank has revealed that it used blockchain technology to inject liquidity into its banking sector. This was part of its efforts to explore emerging technology, the bank stated.

The Saudi Arabian Monetary Authority (SAMA) has been supporting local banks as they seek to resume normal operations following the COVID-19 pandemic. In its most recent gesture, it pumped $13.3 billion into its banking sector. Part of this liquidity injection was deployed through blockchain technology, SAMA has revealed.

The liquidity injection is meant to assist the banks to continue offering credit facilities without having to impose additional charges to their clients. It will also allow them to offer certain services for free, such as e-banking services according to an earlier announcement.

The bank stated, “This action comes as a part of SAMA’s continues efforts in exploring and experimenting emerging technologies and keeping lead pace with the global trends of central banks in assessing the impacts of such technologies on the financial sector.”

In its press release, SAMA touted itself as one of the pioneer central banks in using blockchain technology for funds transfers.

SAMA’s blockchain-friendly approach has enabled financial institutions in the kingdom to explore the technology in their operations. Last year, six banks in Saudi Arabia and the UAE partnered in project Aber, a digital currency-powered cross-border funds transfer initiative. The project was made possible by the partnership between SAMA and the UAE Central Bank.

Saudi Arabia’s regional peers have also been active in supporting blockchain technology. The UAE and Bahrain have been the leaders, with both countries working to create a conducive environment for both local and global digital currency startups.

As CoinGeek reported, the two are presenting themselves as alternatives to global blockchain hubs such as New York, London and Singapore. In such cities, setting up a blockchain company can cost over $750,000. In contrast, setting up the same company in Bahrain costs about $200,000 and even lower in the UAE.